Senate hearings about Apple's alleged tax avoidance have been in the news the last few weeks. News stories abound, describing how Apple generates billions of dollars in profits overseas, using a chain of entities set up in Ireland, pays no U.S. income taxes on those profits and pays almost no income taxes in Ireland. The alleged scandal is so delicious, few reporters passed it up.

Here is an interesting article from AP about citizenship for sale in the Caribbean. Most nations sell citizenship, or at least permanent residence with a path to citizenship (including the U.S. and many EU nations) - Caribbean nations make it very affordable. We have helped our clients obtain citizenship in various countries, mostly in East Caribbean. The need for a second citizenship is usually fueled by tax planning (i.e., the client is planning to surrender primary citizenship) or politics (if you may need to flee Russia or Saudi Arabia someday, you need a second passport). Costs and difficulty of obtaining second citizenship varies by country, but in all cases the most important consideration is the ability to travel using the second passport. For example, an individual holding a U.S. or a Schengen passport may travel most anywhere in the world without a visa. The same is not true for citizens of many Caribbean nations.

With Democrats retaining control of the White House and of the Senate it is very unlikely that there will be an extension of the current $5 million exemption for transferring assets to children by gift or on death. On January 1, 2013 the exemption drops to $1 million and the tax rate goes up from 35% to 55%. We strongly encourage all of our clients (and all taxpayers) to gift today and take advantage of the $5 million exemption before it disappears. The difference between what you children will get if you plan today, versus putting it off until 2013 is literally in the millions. Gift Now!

The U.S. government is requesting information on American account holders from several more Swiss banks. These banks include the giant Credit Suisse, as well as HSBC, Julius Baer Group Ltd., Wegelin & Co., Basler Kantonalbank and Zuercher Kantonalbank. These banks are apparently under secret grand jury investigation in the U.S. The banks have not yet commented on the inquiry.

According to a press release issued by the Internal Revenue Service, U.S. taxpayers with foreign bank accounts now have a second chance to come forward a plead mia culpa. The new program has a deadline of August 31, 2011. The taxpayers who come forward will be subject to penalties and interest on unpaid taxes for the past 8 years, and an additional penalty of 25% of the highest balance in the offshore account.

This morning, the Senate rejected a bill that would have extended the Bush-era income tax cuts. We don’t know how this issue will resolve itself, but tucked into the bill was a provision that will have a profound effect on estate tax law. What is worse, it may make your living trust obsolete at best, and dangerous at worst. We think this estate tax provision is likely to find its way into any bill that eventually passes, because both the President and the Republicans favor it.

After many months of suspense, the Swiss parliament has finally approved the deal struck by UBS and the US Justice Department to disclose the names of about 4,500 US-based clients of UBS who are suspected of tax dodging.

A week after the upper house of the Swiss parliament voted to allow disclosure of UBS clients to the US government, the lower house of Switzerland&#8217;s parliament voted to prevent the disclosure of the names and financial secrets of as many as 4,450 Americans who held undeclared accounts at UBS.

The quagmire involving US taxpayers with unreported foreign bank accounts continues. The latest word: IRS has over 200 dedicated agents conducting audits of those taxpayers who voluntarily disclosed them prior to the October 15, 2009 deadline. These agents are conducting full audits of the taxpayers who came forward (where there is smoke, there is fire, and potentially other unreported tax issues) and looking to impose fairly significant civil tax penalties. The audits also extend to those taxpayers who voluntarily came forward following the amnesty deadline, hoping to avoid criminal sanctions.

The Hiring Incentives to Restore Employment (HIRE) Act (Pub. L. No. 111-14) was signed into law on March 18, 2010. The Act creates tax breaks for businesses hiring new workers and extending higher expensing limits for small businesses that make capital investments. The Act also incorporates provisions of the Foreign Account Tax Compliance Act of 2009, which has far-reaching implications for foreign financial institutions that may have U.S. clients.

On January 22, 2010 the Swiss Federal Administrative Court published its first judgment with respect to the IRS&#8217;s request for information. The case relates to a UBS client who failed to provide the bank with a Form W-9.

The IRS has announced today that UBS will reveal names of 4,450 American account holders. The actual names have not yet been released, and over the next few months these account holders will receive notices from UBS that their names will be disclosed to the IRS. The account holders will then have the option of appealing the proposed disclosure to the Swiss appellate court on the grounds that the disclosure would violate Swiss banking secrecy laws. It is not yet clear how successful such appeals may be.

As Congress frantically looks for ways to pay for the various stimulus and other wasteful spending proposals, increasing estate and gift taxes seems like a natural solution. Although these two transfer taxes account for a small percentage of the government&#8217;s revenues, these taxes are not on the radar screen of the middle class or its defenders. Consequently, these taxes can be increased with little unwanted attention, especially if the taxes are increased indirectly.

Every day more and more Swiss banks say "no" to US business. This year alone 7 Swiss banks that we regularly did business with told us that they will be kicking out all US clients and not accepting any new business.

Several years ago the Justice Department subpoenaed names of Americans who had Visa and MasterCard accounts with offshore banks. The IRS then offered these taxpayers a choice, come forward voluntarily and we will waive criminal prosecution and some monetary penalties, or wait until we get to you and then take the risk of criminal penalties.

Following the indictment of several UBS AG (Switzerland) employees, the Justice Department requested permission from federal court to have the Internal Revenue Service issue John Doe summons to UBS AG (the Swiss parent of UBS). The John Doe summons will instruct the Swiss bank to provide to the IRS information on all U.S. taxpayer who may have bank accounts with the bank in Switzerland.

The State of New York has passed a new law scheduled to go into effect June 1, 2008, requiring internet retailers to collect sales taxes. The new law is expected to generate an additional $78 million of revenue per year for the state. Several other states, including California, are considering similar laws.

The big tax news this month was the Justice Department’s loss in the Wesley Snipes case. Snipes has been cleared of federal tax-fraud and conspiracy charges, but was convicted on three misdemeanor counts of failing to file a tax return. He now faces up-to three years in a prison for the misdemeanor convictions.

In response to Sen. McCain’s proposed tax plan an article in today’s Washington Post (McCain’s Plan for Working Class Offers Plenty for Corporate World) blasted the tax plan as pandering to corporations and businesses. The cry was picked up by several other publications as well. What is the proposed plan and does it amount to pandering?